How Greenspan’s Framework Went Awry – Daniel Kahneman
Complete video at: fora.tv Nobel laureate Daniel Kahneman examines Alan Greenspan’s financial framework in light of the current economic crisis. —– Author Nassim Taleb and Nobel Laureate Daniel Kahneman discuss the intricacies of the financial crisis and its far-reaching influence. Looking forward, they offer proposals to remedy the situation and prevent it from ever recurring. – DLD 2009 Daniel Kahneman is Eugene Higgins Professor of Psychology and Professor of Public Affairs Emeritus at Princeton University. He was educated at The Hebrew University in Jerusalem and obtained his phd in Berkeley. He taught at The Hebrew University, at the University of British Columbia and at Berkeley, and joined the Princeton faculty in 1994, retiring in 2007. He is best known for his contributions, with his late colleague Amos Tversky, to the psychology of judgment and decision making, which inspired the development of behavioral economics in general, and of behavioral finance in particular. This work earned Kahneman the Nobel Prize in Economics in 2002 and many other honors, including the 2006 Thomas Schelling Award given by the Kennedy School at Harvard “to an individual whose remarkable intellectual work has had a transformative impact on public policy”, and the Outstanding Lifetime Contribution Award of the American Psychological Association in 2007.
it might be interesting to look into modelling kahnenman’s distinction between the interest of firms and their employees in terms of the traffic paradox (from game theory)..
The present economic system is based on an addictive process. There is a “War on Drugs”, but no “War on Addictive Credit”. How come?
The “richer” the people become, the lesser “feeling of wellfare” they actualy have…therefore the “never enough”…
We elect people with high moral standards? You would never even be in a position to be elected without compromising many things. The most dangerous wolf in the woods is wearing sheeps clothing.
If firms are not rational, then why would democracies be rational?
Right, but that’s obvious. Entire life is a conflict of interests. That’s why we have built-in cognitive heuristics – to choose the interest of higher survival value at the right time. Everybody has them. So, knowing that, you need to choose the leader whose cognitive heuristics gives higher precedence to altruistic behavior. Alternatively, you can set up an effective checks ‘n balance system to control non-altruistic tendencies. Failure to do so results in a collapse we have witnessed.
Even without maliscious intent, a conflict-of-interest was established, causing biased perception and/or motivating the immoral.
This conflict of interest is the underlying problem, and the time scale discussion was only a symptom. It was too easy to beleive that it was worth the risk because the risk wasn’t really theirs.
I could start a whole bunch of chickenhawk comparisons related to the politics aspect, but it is a symptom, not the root problem:
Conflict of interest
Kahneman is awesome, but his point here lacks insight. Yes, we understand that a CEO’s personal interests and time scales don’t coincide with those of a corporation, but nor do those of a president and his country. That’s why we elect people with high moral standards who are willing to put corporate or public interests above their own private ones. Corporations either need to screen the candidates better or implement effective checks ‘n balances. There’s nothing wrong with time scales.
The entire economic collapse boils down to this fact;
From 2000 to 2006 billions of dollars in loans were given to people who could NEVER pay them back while government enforced this quasi mandate. This was the fuel for greedy financial wizards to fleece the system.
I have mercy for greed in any form. grammarians excuse themselves from getting the point by their correctness.
5 billion peoples does anyone really have anything to say.
That’s not true. And it’s masses. There are no apostrophes in plurals.
I guess you missed the part where you are paying for the super rich’s mistakes, whilst they get away with slightly lower bonuses.
crisis for the super rich means nothing to the mass’s.